I asked myself this question a few times and decided to do some research and I feel like some users would like to know what I found about the REITs vs Real estate debate:
Pros of REITs vs Real estate:
- Higher return on average
- Less risk (diversified REITs funds will never go to 0)
- More diversification
- REITs have management teams that have a lot of knowledge in the industry
- REITs are a lot more liquid
- Less capital required
- You don't have to find tenants, repair roofs, deal with tenants not paying/trashing the property
Pros of Real estate vs REITs:
- Having the ability to buy small properties at a good price (large REITs won't compete to buy a $500,000 property)
- You can live in the property you bought
- Ability to have a higher return if you buy at the right price
- REITs can be be expensive/inexpensive at times (valuations are volatile), property prices are not as volatile.
- tax deductions
- Possibility to have a higher leverage
- Lower correlation to the stock market then REITs, directly investing in real estate leads to more diversification
Obviously, I could be wrong and I could be missing out on a lot of points, feel free to comment and I'll add your thoughts to the list!
Sources:
- https://seekingalpha.com/article/4204857-reits-vs-rentals-best-way-invest-real-estate
Submitted April 16, 2019 at 02:58PM by etienner http://bit.ly/2PbpTMD
